With check fraud on the rise in 2023 now is a good time to update your payments technology and adopt virtual card payments. Check fraud takes many forms including check washing, mailbox theft, and can lead to online sale of stolen checks. Read on to learn more about how check fraud could impact your business and what you can do to prevent it.
What is check washing?
Washing checks using solvents (for example, acetone or bleach) will remove ink while leaving the check's paper undamaged, thereby allowing a fraudster to change the check's payee and the check amount. According to the New York Times, check washing has “evolved from small-time criminals pilfering a check or two over the last few years to more organized efforts involving the theft of mail in bulk from postal collection boxes.”
Criminals target mailboxes and the USPS (United States Postal Service) in general, stealing mail in bulk to obtain checks that they can wash and change. They can use the banking details from those checks to create cloned checks and sell those details online, creating a window of opportunity to pilfer from bank accounts for days or weeks before being caught.
A dramatic increase in check washing in the last few years
There are some astonishing figures when looking at how much check washing has increased since 2020, and it has moved from small players to organized crime costing businesses and individuals vast amounts of money.
The American Banking Association (ABA) estimated that check fraud, including check washing, cost banks and their customers $1.3 billion in 2020. Yahoo Finance recorded that check washing alone cost businesses over $800 million in 2023.
It is not a new crime, but it was rediscovered during the pandemic and has evolved into highly organized crime. According to the USPS, “From March 2020 through February 2021, the USPS received 299,020 mail theft complaints, an increase of 161 percent compared with the same period a year earlier.”
The globalization of fraud has only increased the opportunity to maximize the amounts criminals can steal from you before they are caught and have to move on to the next bank account. In the meantime, you have to change account numbers, reprint checks and try to keep up with what the next scheme will be.
Catch me if you can: Fraudsters are speedy - - you need stealthy answers
Manual solutions are cumbersome and costly. You can issue accounts payable employees with indelible gel pens, which can’t easily be washed, but it’s not a perfect solution as checks will slip through, and your bank information is still on the check. You can change the paper on your checks which will involve costly retooling. Any of these manual solutions will likely be overcome in time, and by the time you have changed your processes and materials, you will have another new way of washing checks to deal with. Not to mention simply using your paper checks to create clones using all your bank details, taking your money, sharing your details with others, and moving on to the next victim.
According to a February 2023 Yahoo News report, “Stolen checks pose an extra identity theft risk, too. Criminals in possession of a stranger’s legal checks can use the listed name and address to build phony identities for theft by opening bank accounts and applying for loans on behalf of the victim. Additionally, washed checks are making their way to underground markets on messenger services such as Telegram and WhatsApp.” According to David Maimon, associate professor of criminal justice and criminology at Georgia State University, in the Chicago Sun-Times, “Some stolen checks are sold on the internet for hundreds of dollars in what has become a “very organized type of crime.”
Given the speed with which fraudsters can adapt to any changes you make in your check writing, it may be time to consider an approach that thwarts their activity by eliminating their opportunities.
Take checks out of the equation with virtual card payments
With virtual credit cards, the opportunity for stealing and reusing payment information is virtually zero. Because a new account number is generated for each transaction, a virtual credit card number can not be used for another transaction or supplier.
This is where a supplier enablement program comes into play and is a helpful tool if you have a partner like WEX who can help you onboard suppliers. The more you integrate your payment system with your suppliers, the more your payment security increases exponentially. You also save time and money by eliminating the cumbersome clerical tasks of writing checks, posting them, and other ancillary filing tasks. You build better relationships with suppliers; payments can be scheduled to meet both of your requirements, and neither of you risks fraud along the payment process.
Although it can seem daunting to create an end-to-end system between you and your suppliers — integrating different enterprise resource planning systems (ERPs), human resource processes, etc., it is much more straightforward than it might first seem. WEX has decades of experience integrating electronic payments capabilities with multiple ERPs.
Get help onboarding your suppliers to a virtual card program
With WEX’s supplier enablement program, the WEX team works closely with you to introduce the ease of virtual card acceptance to your suppliers (also known as “onboarding”). WEX campaign managers work to help you prioritize your suppliers and create a specific communications and onboarding campaign for them. Financial and time saving benefits accrue for both you and your suppliers. Firstly, paying your suppliers through an enablement program and virtual credit cards costs much less than writing checks or using Automated Clearing House (ACH) payments. Further, WEX shares the commission typically associated with card payments with its clients, which can be shared with your suppliers.
By implementing a supplier enablement program, you can ensure criminals don’t have access to your financial information - or that of your suppliers. With supplier enablement, a virtual credit card number is generated for each transaction which can only be used for that transaction at a specific time to a specific payee. The number can not be used again, even for the same supplier, so it is useless in a fraudulent transaction.
Seamless payments and supplier enablement are becoming more ubiquitous across all links in a modern business supply chain — in large and small businesses. By making the changes sooner rather than later, you will protect yourself and your suppliers’ time and money and have the bonus of foiling yet another criminal enterprise that plagues businesses worldwide.
Learn more about how WEX payment solutions can be tailored to your business, so you can accelerate and streamline operations while creating lasting growth and success for your organization.
Resources:
Yahoo Finance
The New York Times
US Treasury
ABC News
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